SPRINGFIELD Ill. Feb 28 The Illinois House of
Representatives on Thursday was scheduled to debate harsh
pension reform measures aimed at restoring the financial health
of the nation's worst-funded state pension systems.
Powerful House Speaker Michael Madigan scheduled the debate
on proposals that would demand bigger pension contributions from
workers and raise the retirement age. He also proposed
completely eliminating cost-of-living increases for retirees or
tying them to the funding level of the state's pension system.
The debate was set to begin at 11:30 a.m. local time but was
delayed for an hour.
Illinois' pension system is the worst-funded among U.S.
states at just 39 percent. One of Madigan's proposals would halt
annual cost-of-living adjustments until the funding level is at
80 percent, which is considered healthy for retirement funds.
Madigan is widely considered the most powerful politician in
Illinois, having been speaker for nearly 30 years. He is also
chairman of the state Democratic party.
But he has been slow to push for a pension fix that would
bolster the state's sagging finances and satisfy credit rating
agencies, which have been slashing Illinois' credit ratings, in
part due to inaction on retirement system reforms.
Morningstar Municipal Credit Analyst Rachel Barkley said the
Madigan package is far-reaching and would be credible reform.
"It will be interesting to see if they will pass it," she
Moody's Investors Service, which gave Illinois the lowest
debt rating of states it analyzes, has warned that failure to
enact major pension reforms could trigger another downgrade.
"The state has difficulty gathering the political willpower
to enact reform that will have an impact on the liability that
exists," Ted Hampton, a Moody's analyst, said on Thursday.
Credit rating agencies also expect that any enacted reforms
will be fought by Illinois labor unions in court based on a
provision in the state constitution prohibiting pensions from
being diminished or impaired.
The severity of Madigan's proposals prompted speculation
that he is testing support for various ideas in an effort to
reach a comprehensive agreement. Democratic State Representative
Jack Franks said while adjustments to cost-of-living increases
were likely, eliminating them is "just mean spirited."
"This seems to be politically motivated," Franks said.
Madigan recently stepped up the pressure on unions to accept
more far-reaching reforms, sending them a letter saying they had
failed to present serious proposals to fix the system.
Public sector unions, which provide substantial political
and financial support to the Illinois Democratic party, have
criticized proposals that would limit or cut benefits to retired